Manpower Sees French Labor-Deal Boon Matching Skills to Jobs

Jan. 24 (Bloomberg) -- Manpower Inc.’s Alain Roumilhac says
France’s new labor accord is a much-needed boon for the
employment company in its largest market.

Although far from revolutionary, the Jan. 11 pact between
unions and business groups would, in addition to making firings
easier and labor rules more flexible, allow temp companies for
the first time to hire people on permanent contracts to be
farmed out to clients.

For Milwaukee-based Manpower and its peers Randstad Holding
NV, Adecco SA, Group Crit and Synergie SA -- all of which count
France as their biggest revenue generator -- the move would open
the door on some margin-rich business, Roumilhac, chairman of
Manpower’s French unit, said in an interview this month.

“If we get staff on permanent contracts, they’ll be our
employees, so we’ll be able to invest much more on training
them, and we hope to be able to monetize that and have better
margins,” he said. “It will allow us to move up-market and
provide clients skills they’re struggling to find. Our clients
will pay more for them.”

In Germany, Sweden, the Netherlands and Italy, which let
temp companies hire permanent workers, the net margin before tax
for Manpower, Adecco and Randstad averages 6 percent of sales,
about double that in France, he said.

The labor accord is an effort by President Francois Hollande
to address concerns of business leaders that rigid French labor
rules risk worsening the country’s economic climate. Companies
ranging from carmaker PSA Peugeot Citroen and Air France-KLM to
drugmaker Sanofi are cutting thousands of jobs, driving
unemployment to a 13-year high.

Skills Struggle

The agreement may also help narrow the mismatch of skills
and available jobs that has left more than 10 percent of
France’s work-age population without employment. While jobless
claims rose to 3.13 million in November, the nation’s employment
body’s latest figures show about 36 percent of French companies
planning to hire struggling to find the skills they need.

“There are a lot of jobs for which we are struggling to
find enough competent people,” said Roumilhac. Manpower, whose
French unit accounts for about 27 percent of its $21 billion
sales, plans to seek skills including software engineering and
accounting for its permanent contracts.

The company and its rivals are being helped by the fact
that the labor pact seeks to encourage employers to offer more
permanent contracts. French employers -- faced with an
inflexible “Code du Travail,” a 3,200-page labor rulebook that
decrees everything from job classifications to the ability to
fire -- have increasingly used short-term contracts.

Stronger Candidates

Of the 21 million work contracts signed each year, only 3
million are permanent and offer employees powerful legal and
financial tools when faced with the loss of their jobs.

Fourteen million of the contracts are for less than a
month, according to Louis Gallois, former head of Airbus SAS
parent European Aeronautic Defence and Space Co., who was asked
by Hollande to write a report on French competitiveness.

Randstad says the labor accord would allow it to optimize
its annual training budget of 40 million euros to tailor the
skills of employees to jobs in high demand, such as plumbers,
welders, masons, research engineers and hospital nurses.

The possibility of permanent jobs may also lure stronger
candidates such as young professionals and retirees, Francois
Beharel, chairman of the Diemen, Netherlands-based company’s
French unit, said in e-mailed responses to questions.

In Germany, Italy, the Netherlands and Sweden, permanent
contracts account for 5 percent to 10 percent of employees
placed out by staffing companies, said Manpower’s Roumilhac.
They tend to be skilled people who are easy to employ.

Call Centers

To be sure, not all companies are sanguine about the
accord. Call-center operators such as Teleperformance SA are
bracing for higher short-term contract taxes.

“The possible surcharge on short-term contracts would be a
real clobbering for our industry,” according to SP2C, the
business federation of call-center operators, which counts
Teleperformance among its members.

Although about 84 percent of the call-center industry’s
60,000 employees were on permanent contracts in 2011, “the
marginal use of short-term contracts addresses our specific need
of flexibility.”

Employment companies will not be subject to the tax.

Manpower shares rose as much as 1.7 percent to 47.94 euros,
the highest in almost 10 months. They were up 1.5 percent at
10:48 a.m. in New York trading.

‘Very Positive’

Shares of Adecco, the biggest temporary jobs company, which
gets 30 percent of its sales in France, fell 1.1 percent to
52.15 Swiss francs at 3:49 p.m. in Zurich today after reaching
an 18-month high yesterday. Randstad fell from yesterday’s 18-month high, sliding 0.8 percent to 30.16 euros in Amsterdam.

The stocks of smaller French rival Group Crit were
unchanged at 15.75 euros at 3:50 p.m. in Paris, and Synergie was
up 0.2 percent at 8.59 euros.

The labor market accord, which would make firing procedures
shorter and more predictable and allow companies to reduce
working time and salaries when demand slows, has to be enacted
by the French Parliament.

“The impact of the agreement will not be immediate, as it
needs to be written into French law in the spring, but there is
limited risk of it being amended,” Olivier Lebrun, an analyst
at Natixis in Paris, wrote in a Jan. 14 note. “This amounts to
another very positive development in the staffing sector in
France.”

Growth Question

Hollande, who also pledged to introduce a tax credit for
companies after saddling businesses and consumers with 20
billion euros in extra taxes in 2013 to cut the country’s
deficit, has yet to improve on what he inherited from
predecessor Nicolas Sarkozy: an economy that has barely grown in
the past year and unemployment on track for a euro-era record.

Randstad’s Beharel cautioned that the impact of the
agreement can only be assessed “in the long term” since the
details of the permanent contract for employment-services
companies have yet to be discussed with labor unions.

“At the end of the day, economic growth remains key for
our sector and the labor market,” said Beharel.

France’s economy is estimated by the International Monetary
Fund to grow by 0.3 percent this year, less than half the
government’s target of 0.8 percent.

“For the moment, there’s no signs of improvement,” said
Manpower’s Roumilhac. “I’m hoping for a rebound from September.
The economy is about confidence, above all. The accord provides
a backdrop that is more favorable for entrepreneurship.”